MARBLES GETS LUCKY: DEALS DONE FOR 9 ENTERTAINMENT OUTLETS

DAN ALAIMO

SAN LEANDRO, Calif. -- Lucky Stores signed a long-term agreement early this month with Marbles Entertainment, Los Angeles, for the operation of nine leased-space entertainment software departments, said Matthew Feinstein, vice president of Marbles.

The departments had formerly been run by Wherehouse Entertainment, Torrance, Calif., a prominent music and video specialty store chain in the West. Wherehouse, which emerged from Chapter 11 bankruptcy protection on Jan. 31, had previously said that it was unhappy with the performance of the video-rental shops.

"We've been worried about so many other things with the bankruptcy that we probably didn't give [the Lucky project] the attention it deserved," Bruce Ogilvie, former president and chief executive officer told SN.

Marbles is taking over the departments at the conclusion of Wherehouse's leases, said Feinstein. All will be converted to the Marbles banner by the end of May, he added. A Lucky spokesperson declined to comment on the deal.

Marbles plans to make the departments successful by upgrading the inventory, marketing and decor, said Feinstein.

"We are going to make them real exciting home-entertainment stores," he pointed out. "Wherehouse's focus is the big home-entertainment combo stores. Our main focus is store-within-a-store supermarket video." Besides video rentals, Marbles offers sell-through, games, licensed products and music.

"We have a marketing plan and will aggressively advertise in the cities where we are converting these stores into Marbles," Feinstein continued. Though he stopped short of criticizing the Wherehouse program, he added, "There may be a lot of people in those areas that don't know that the video rental store inside a supermarket exists."

The nine stores are in Hemet, Lancaster, El Cajon, Oxnard, Paramount, Arleta, Stanton, Fontana and Santa Maria, all in California. With these, Marbles will operate departments that will include 4,000 to 8,000 rental units covering areas of 1,000 to 2,000 square feet in 12 Lucky stores and 10 supermarkets operated by Vons Cos., Arcadia, Calif., said Feinstein. This is twice the number of stores Marbles had at the end of 1996, he noted.

Marbles had opened three departments in Lucky stores earlier this year. Most are in the existing video rental department space of former Smith's Food & Drug Center stores that had been acquired by the other chains.

Feinstein wouldn't reveal the duration of the leases, but said they are "significantly long-term." Marbles made the long-term agreement because of its success so far with the store-within-a-store departments it now runs, he said.

"We are confident that a long-term commitment will be very beneficial for both Marbles and Lucky," he said. "That shows our commitment and it shows that we are excited about what we are doing and that we are happy with the revenues that we are making in the stores."

The agreement between Lucky and Marbles represents the continuing development of video rental departments in southern California supermarkets, said industry observers. Although it is the studios' backyard, southern California has been one of the last areas of the country to embrace video rentals in supermarkets. Competition, small store sizes and labor costs have kept retailers from embracing the format.

Smith's had built stores with large video departments, but eventually pulled out of the market. Now the four major players in the area -- Lucky, Vons, Ralphs Grocery Co., Compton, Calif., and Albertsons, Boise, Idaho -- occupy most of the former Smith's stores. Albertsons' video departments are run by a rack jobber, while Ralphs has leased-space departments operated by Blowout Entertainment, Portland, Ore.

Besides taking a total entertainment software approach to the departments, Marbles gives heavy emphasis to marketing and promotion. For example, when one of the stores opens on May 1, customers will be greeted by an employee in a Darth Vader costume, said Feinstein.

In the new stores, the company will improve on what they have done before by placing carpeting and chairs in front of a big-screen television that will play hit children's movies, said Feinstein.